Consider a market where an informed monopolist sets the price for a good or as set with a value unknown to potential buyers. Upon observing the price, buyers may pay some cost for information about the value before deciding on purchases. To restrict buyer beliefs we generalize the idea of the...

This paper views authority as the right to undertake decisions that impose externalities on other members of the organization. When only decision rights can be contractually assigned to one of the organization's stakeholders, the optimal assignment minimizes the resulting inefficiencies by...

We consider mechanisms for resolving conflicts between two agents who are uncertain about each other's fighting potential. Applications include international conflict, litigation, and elections. Even though only a peaceful agreement avoids a loss of resources, if this loss is small enough, then...

This paper examines the commitment effect of delegated bargaining when renegotiation of the delegation contract cannot be ruled out. We consider a seller who can either bargain face-to-face with a prospective buyer or hire an intermediary to bargain on her behalf. The intermediary is able to...

This paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism. We show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent. In contrast with the...

We describe the evolution of productivity growth in a competitive industry. The exogenous wage rate determines the firms' engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally stable. In the steady state, the...

This paper provides new analytical tools for studying principal{agent problems with adverse selection and limited commitment. By allowing the principal to use general communication devices we overcome the literature's common, but overly restrictive focus on one{shot, direct communication. In...

This paper studies the intertemporal problem of a monopolistic firm that engages in productivity enhancing innovations to reduce its labor costs. If the level of wages is sufficiently low, the firm's rate of productivity growth approaches the rate of wage growth and eventually the firm reaches a...